By law of May 4th 1976, the Federal Republic of Germany introduced a system of compulsory near-parity co-determination for big firms with more than 2.000 employed.' In their sentence of March lrst 19 79, when the new law was found not to be in violation with the constitution, the judges of Karlsruhe emphasized the importance of the workability or organizational viability of co-determination in big industry. Thus, an economic notion was explicitly introduced into their legal argument, a notion which only implicitly underlied some of the legal criticism advanced against the law (II). Starting from the economic theory of the firm (III), which is here analytically contrasted with some criticisms advanced in the economic literature and aiming at the new institutions of co-determination (IV), we arrive at a completely new interpretation of the functional workability of co-determination which may usefully be seen as an institutional setting by which the failure of intra-organizational planing, a ubiquitous feature modern big enterprise, is overcome.